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Posted by sandy on January 13, 2008, 4:15 pm
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This will be my first year trying to make financial decision and
understand/file taxes by myself (hubby died recently) and I've got
some question that I'm hoping you can help me with.
I've been toying with the idea of selling a good portion of our
portfolio as I keep hearing that a recession is coming. I'm guessing
that there would be tax consequences if I did so. My husband and I in
past years sold off a number of poorly performing stocks (tech stuff)
at quite a loss. Can I offset any current stock gains by that
carryover loss or is it limited to $3,000 (or is that $3,000 limit
offset refer only to earned income?). The stocks that we sold were in
joint name.
Also like opinions as to whether this is something that I should be
considering doing or should I just let investments sit in the account
(The great majority is invested in mutual funds). And should I decide
to sell, is a money market the best option or are their better
investments in times of recession?
I live in a tiny town and have to travel 50 miles just to see a
traffic light. I don't believe that we have any (or any good)
financial advisors locally. Would it be worthwhile taking the trip to
consult one? And if yes, how do I make a decision as to who to call?
Appreciate your opinions.
Sandy
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Posted by Harlan Lunsford on January 13, 2008, 4:53 pm
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sandy wrote:
> This will be my first year trying to make financial decision and
> understand/file taxes by myself (hubby died recently) and I've got
> some question that I'm hoping you can help me with.
>
> I've been toying with the idea of selling a good portion of our
> portfolio as I keep hearing that a recession is coming. I'm guessing
> that there would be tax consequences if I did so. My husband and I in
> past years sold off a number of poorly performing stocks (tech stuff)
> at quite a loss. Can I offset any current stock gains by that
> carryover loss or is it limited to $3,000 (or is that $3,000 limit
> offset refer only to earned income?). The stocks that we sold were in
> joint name.
>
> Also like opinions as to whether this is something that I should be
> considering doing or should I just let investments sit in the account
> (The great majority is invested in mutual funds). And should I decide
> to sell, is a money market the best option or are their better
> investments in times of recession?
>
> I live in a tiny town and have to travel 50 miles just to see a
> traffic light. I don't believe that we have any (or any good)
> financial advisors locally. Would it be worthwhile taking the trip to
> consult one? And if yes, how do I make a decision as to who to call?
> Appreciate your opinions.
>
> Sandy
>
While I can not give you financial advise.......! Really, I shouldn't
and won't. However.....
1. There are financial advisers and yet even more financial advisers.
Some are fee only, meaning they are not in the business of selling
stocks, bonds, mutual funds, annuities, etc... If you want to find
an adviser, this is the guy to look for, and chances are he won't be
even 50 miles away, but in a much larger burg.
2. You say most investments are in mutual funds. Good, I say.
Use an internet site like Yahoo Finance to look at each one, paying
attention to Morningstar ratings of the funds. If they're four stars,
hold em. If the investment is common stock, and analysts don't like
em, i.e. average recommendation of 2.5 or less, fold em.
I guess I'm saying take a look first and see if you can make heads or
tails out it.
Many clients ask me for advise, but all I can tell them is what I would
do if I were in their situation(s).
ChEAr$,
Harlan Lunsford, EA n LA
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by dpb on January 13, 2008, 5:16 pm
Please log in for more thread options sandy wrote:
...questions about subject...
I would add to Harlan's advice to _NOT_ be precipitate in making
decisions here...depending on age, if you were comfortable w/ hubby
holding these investments, it might just well be you've got time to ride
it out, anyway. Are they in IRA or other retirement accounts or not is
another major factor. There are just too many unknowns and this isn't a
good place for specific advice so I'd again urge caution in going too fast.
The $3000 is a annual carryover maximum for that small detail...what you
wouldn't use this year could/would be carried to next.
--
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Seth on January 13, 2008, 5:30 pm
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>I've been toying with the idea of selling a good portion of our
>portfolio as I keep hearing that a recession is coming. I'm guessing
>that there would be tax consequences if I did so. My husband and I in
>past years sold off a number of poorly performing stocks (tech stuff)
>at quite a loss. Can I offset any current stock gains by that
>carryover loss or is it limited to $3,000 (or is that $3,000 limit
>offset refer only to earned income?).
You can offset current gains with carryover loss until you run out.
You can also offset up to $3,000 of ordinary income with carryover
loss.
Seth
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by joetaxpayer on January 13, 2008, 6:26 pm
Please log in for more thread options sandy wrote:
> I've been toying with the idea of selling a good portion of our
> portfolio as I keep hearing that a recession is coming. I'm guessing
> that there would be tax consequences if I did so. My husband and I in
> past years sold off a number of poorly performing stocks (tech stuff)
> at quite a loss. Can I offset any current stock gains by that
> carryover loss or is it limited to $3,000 (or is that $3,000 limit
> offset refer only to earned income?). The stocks that we sold were in
> joint name.
First, sorry for your loss. This is not the time to make rash decisions.
The losses first apply to to any gains during the year, then up to $3K
against ordinary income, then if any remains, it gets carried forward.
I don't have the data handy, but a money manager who was a guess on
Maria Bartiromo's* show last week remarked that the S&P averaged 9%
during times of recession. A recession tends to drive interest rates
down, which in turn makes shock, esp dividend paying stocks, more valuable.
While I'd not recommend the 'selling a good portion', I would look at
your allocation, and find the mix that lets you sleep at night. Keep in
mind, you will likely see rates continue to drop further, and that means
whatever you moved to money market funds will see yields drop following
short term rates.
A number of index funds and/or ETFs can be used to create the right
allocation, one that should take minimal effort to manage (you glance at
the current percent and make a shift if it's out of whack compared to
your target allocation.)
Not having a profile on you, I'll suggest this statement, and leave it
for others to help modify:
"If the market dropped 30% by one year from now, I would buy more stock
to get right back to my target allocation."
Your current allocation should be a mix so you agree with this
statement. You see, if a drop of that magnitude would scare you out of
the market and you would panic, your allocation is too high.
JOE
*I don't pay attention to the stock picking, I watch for the Greenspan
interview, and listened to this one guest remark on a piece of historic
data.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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